Amazon Sales Increase, Profits Decrease
May 7, 2008
As I suspected, Amazon.com announced on Apr. 23 that its profit margin is expected to fall in the second quarter. It also reported that the profit margin dipped in the first quarter, the second quarter in a row.
The company posted a 37% increase in sales and a 30% increase in net income from the first quarter of 2007. International sales rose 44%.
The profit margin is the percentage that profit constitutes of total sales. In spite of increasing sales, Amazon.com’s stock has been unstable for some time because of profit concerns.
“Our sales growth this quarter was driven by low prices and millions of in-stock items available for immediate shipment,”said Jeff Bezos, founder and CEO of Amazon.com.
In that statement lies the reason for recent Amazon.com changes that have POD publishers up in arms. The only short-term hope publishers have is to present a better solution to address the company’s profit margin problem. Even a favorable judgment in an anti-trust suit will come too late to save those who will be most adversely affected in the short-term.
Maybe it’s time for an online meeting of publishers where we can discuss possible solutions.
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6 Responses to “Amazon Sales Increase, Profits Decrease”
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Amazon sells everything from books to food to electronics to xylophones, and millions of things in between.
To imply POD books are the reason for Amazon’s profit margin problems is ridiculous. Suppliers (publishers) are not responsible for figuring out ways to help a retailer make higher profits. It is our job to figure out ways to keep our books affordable for book lovers and our fees affordable for authors…and to stop a corporate giant from trying to dominate the entire publishing industry.
Taking actions that tempt an anti-trust investigation by the federal government is NOT the way for a company to save money - far from it.
Angela Hoy
WritersWeekly.com
I am not suggesting that POD books are the problem. I am suggesting that for our survival in the short run we may need to make suggestions that will be to the mutual benefit of publishers and Amazon.com.
If a suit needs to be attempted afterward, so be it, but publishers need to survive right now, and a verdict may come too late to stop the carnage. Not many publishers will have the heart to start all over again after they’ve lost everything.
I got this idea from reading The Seven Habits of Highly Effective People. We’re the ones who will suffer, not them. If we can present a plan that addresses both our needs, we’ll come out ahead. It may not be our job, but we all need to pay bills.
Offering to feed only your hand to the lion when he’s going after you entire body is not the solution. It’s always a bad idea to pay a ransom, negotiate with terrorists, or bow to this type of corporate threat. You can bet Amazon will make anybody sign a binding contract if they try to negotiate anything with them…which will very likely prevent them from saving themselves later via the courts.
So we don’t sign the contract if the terms are not in our best interest long-term. If we stick together, people will be less likely to break ranks. The companies who signed agreements with them were approached individually.
You have much more to lose than I do. I’m just getting started. I’ve read that the initial filings against Microsoft were dated back 20 years before a favorable verdict was reached, and Microsoft still hasn’t complied with all the terms. They have deep pockets to finance a fight. So does Amazon. We don’t.
Amazon has already made their “offer” and already said they’re not going to back down. You already know their “offer” is not in the best interests of publishers, author or book buyers.
Go ahead and negotiate with them if you want, but remember that you’re probably going to have to have to raise your prices in the end…just to put more money in Amazon’s pockets. Your prices will probably be higher than the market will bear. For that and many other reasons I’ve already covered on WritersWeekly.com, you may very well go out of business anyway. You can choose to fight now and stop them from taking over the entire industry, or you can give in to the bully now and keep giving him more and more lunch money until you eventually go out of business. That’s your choice.
I don’t do business with tyrants. If I did, I wouldn’t be able to look at myself in the mirror each morning. I’d rather fight to the death from the get-go than be bullied for years to come, desperately wishing I’d stood up for myself in the very beginning.
Good luck to you.
Angela Hoy
WritersWeekly.com
Maybe I’m just naive enough to think that talking with them will work. Right now none of this is a problem for me because I’m just getting started and can diversify my business plan. My heart bleeds for people like you who have invested so much time and energy into building their businesses. Good luck to you, as well.